Daily Morning Note – 23 May 2022


Welcome to our Daily Morning Note from our Research team!


Stocks to watch: NIO

The Straits Times Index (STI) climbed 1.6 per cent or 49.87 points to close at 3,240.58 on Friday (May 20) amid a wider regional rally. In the broader Singapore market, gainers beat losers 340 to 170, after 1.81 billion securities worth S$1.54 billion changed hands. Among major regional indices, Hong Kong’s Hang Seng Index surged 3 per cent, Japan’s Nikkei 225 gained 1.3 per cent, South Korea’s Kospi rose 1.8 per cent, Jakarta Composite Index climbed 1.4 per cent, while the Kuala Lumpur Composite Index slipped 0.02 per cent.

The Dow and S&P 500 finished a rollercoaster session essentially flat, concluding a bruising week of losses on an uncertain note. Worries about a recession as the Federal Reserve hikes interest rates and inflation tests consumer resilience weighed on the market all week, pushing the S&P 500 into a bear market earlier in Friday’s session. The broad-based S&P 500 finished at 3,901.36, basically unchanged for the day but down three percent for the week. The Dow Jones Industrial Average was also unchanged at 31,261.90, while the tech-rich Nasdaq Composite Index fell 0.3 per cent to 11,354.62.

Top gainers & losers




Prices and rentals of Singapore industrial spaces continued to rise in the first quarter of 2022, despite a dip in the overall occupancy rate, according to the quarterly market report published by JTC. In Q1 2022, the overall occupancy rate fell to 89.8 per cent, a drop of 0.4 percentage points compared to the previous quarter, due to new completions picking up significantly, and increase in supply exceeding new demand. Despite the drop in occupancy, price and rental indices of all industrial space rose by 2.1 per cent and 1.0 per cent respectively compared to the previous quarter. SGX lists 8 industrial S-Reits, of which 6 have exposure to Singapore-based industrial assets. These 6 trusts are AIMS Apac Reit, Ascendas Reit, ESR-Logos Reit, Mapletree Industrial Trust, Mapletree Logistics Trust, and Sabana Industrial Reit. Assets of Daiwa House Logistics Trust and EC World Reit are based in Japan and China respectively.

Changi Airport Terminal 2 will reopen progressively from May 29, as the air hub prepares to meet the expected increase in passenger traffic in the months ahead. The terminal has been closed for upgrading works since May 2020. When completed by 2024, the expansion works will raise the terminal’s capacity by 5 million to 28 million passenger movements per year, said Changi Airport Group on Sunday (May 22). In the first phase of the reopening, key touchpoints such as arrival immigration, baggage claim belts and contact gates at the southern wing of the terminal will be ready for flight operations. The terminal will host mainly peak-hour arrival flights of airlines operating in T3. A small number of T3 departure flights may use boarding gates at T2, although passengers on these flights will continue to check in and clear departure immigration at T3.

Wee Hur Holdings’ recent sale of a chunk of its Australian purpose-built student accommodation (PBSA) portfolio could be described as something of a coup for the construction and real estate group. The mainboard-listed company had announced in a bourse filing last month that it will be selling a 9.9 per cent stake in Wee Hur PBSA Master Trust (WHPMT) for A$112.7 million ($113.3 million). Other shareholders of WHPMT holding a 40 per cent stake will also divest all of their interest in the property trust. The deal values the fund’s properties at A$1.14 billion, with an equity value of A$551.1 million. The latter is 1.4 times’ its current value on the property developer and builder’s books. The buyer, Reco Weather, is a Singapore-based investment holding company linked to state investment firm GIC.


DIDI Global is widely expected to secure a blessing from shareholders on Monday (May 23) to delist in New York, capping an 11-month ordeal that wiped out around US$60 billion of its market value and turned the ride-hailing giant into a symbol of China’s tech crackdown. The Internet firm’s biggest backers including SoftBank Group, Tencent Holdings and Uber Technologies are expected to vote in favour of a delisting at an extraordinary general meeting in Beijing, according to market observers. That would clear the way for the company to cooperate with regulators who are demanding an overhaul of its data systems as part of a cybersecurity review. Only then will Didi be free to begin preparing for a Hong Kong share float, the best outcome investors say they can hope for. The retreat is part of what many see as comeuppance for a company known for pushing the limits with Beijing authorities.

The US dollar rose against the euro on Friday (May 20), as investor unease about the potential economic fallout from the US Federal Reserve’s efforts to squash inflation bubbled to the surface, souring risk sentiment on Wall Street. The dollar rose 0.3 per cent against the euro as US stocks tumbled on Friday, putting the S&P 500 Index on the verge of confirming that it has been in a bear market since hitting a record high in January. The US currency has been supported in recent months by a flight to safety by investors, amid a rout across markets due to fears of the impact of soaring inflation, a hawkish Federal Reserve and the Russia-Ukraine conflict. That rally, however, sputtered last week as increased volatility in global financial markets, coupled with the lofty levels the dollar had scaled in recent months, led investors to reach for the safety of the yen and the Swiss franc. For the week the US currency was down about 1.3 percent, its worst weekly showing against the euro since early February.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR

Q & M Dental Group Ltd – New clinics support earnings growth

Recommendation: BUY (Maintained); TP S$0.71, Last close: S$0.50; Analyst Paul Chew

– Earnings were within expectations. 1Q22 revenue and PATMI were 27%/25% of our FY22e forecast. New dental clinics drove dental earnings growth.

– Excluding disposal gains and COVID-19 PCR earnings, we estimate dental earnings growth of 27% to S$5.7mn in 1Q22.

– We maintain our FY22e PATMI and BUY recommendation. The target price is unchanged, and core dental operations are valued at 25x PE FY22 earnings, in line with industry peers. Listed associate, Aoxin Q & M Dental (S$0.175, Not Rated), is valued at market price with a 20% discount. Q & M Dental is expanding its franchise of dental clinics across Singapore and Malaysia. We estimate the number of clinics to grow at 18% CAGR over the next two years (or 27 p.a. vs management target of at least 30 p.a.).

Prime US REIT – Healthier leasing demand

Recommendation: BUY (Upgraded), Last Done: US$0.73

Target Price: US$1.00, Analyst: Natalie Ong

– 1Q22 distributable income (+19% YoY) was in line, forming 25% of our FY22e estimate. It was lifted by the acquisition of Sorrento Towers and One Town Center in Jul2 and higher carpark income.

– Leases signed jumped 80% QoQ; 172k sq ft was signed at +3.4% reversions. Backfilling at Crosspoint (+5.4ppts) and 222 Main (+3.7ppts) was offset by non-renewals resulting in 0.4ppt decline in portfolio occupancy to 89.9%

– Upgrade from ACCUMULATE to BUY, DDM-TP (COE 9.6%) raised from US$0.94 to US$1.00 as we roll forward our forecast. Our COE nudged up from 9.5% to 9.6% on higher risk-free rate assumption. Current share price implies FY22e/FY23e DPU yield of 7.6%/8.8%. Prime is our top pick in the sector for greater tenant exposure to STEM/TAMI sectors. Catalysts include improved leasing and a greater return to office.

Sea Ltd – Improving unit economics

Recommendation: BUY (Maintained); TP US$150.00, Last close: US$79.66; Analyst: Jonathan Woo

– 1Q22 revenue was in line, at 21% our FY22e forecasts. Net loss slightly underperformed, at 30% of our FY22e forecasts due to higher operating expenses and tax rate. EPS of -US$0.80 beat consensus estimates of -US$1.15 by 31%.

– Revenue growth led by 64%/360% YoY growth in Shopee and SeaMoney.

– FY22e revenue guidance for e-commerce widened on the bottom-end by US$0.4bn

– We maintain a BUY recommendation with a lowered DCF target price of US$150.00 (previous US$196.00), with a WACC of 6.9%, and a lowered terminal growth rate of 3.0%.

LHN Ltd – Maintaining strong occupancy levels

Recommendation: BUY (Maintained); Last Done: S$0.31

TP: S$0.51; Analyst: Vivian Ye

– 1H22 results within expectations, with revenue and adjusted PATMI at 46%/55% of our FY22e forecasts. Excluding one-off items, adjusted PATMI was down 7.6% YoY.

– Co-living is the major revenue driver, up 40.6% in 1H22. We expect the number of rooms to double over the next two years.

– Maintain BUY with a higher TP of S$0.51, from S$0.49. FY22e forecasts remain largely unchanged. Valuation for all business segments except for LHN Logistics (LHNL SP, Not Rated) is pegged to 6.5x FY22e P/E, while the industry is trading at 13x. This gives us S$0.40/share. We add another S$0.11/share from the market value of its listed subsidiary, LHN Logistics. We build in a 20% discount buffer to account for any volatility in its share price.

Sunpower Group Ltd – Recovering margins

(Non-rated); Last Done: S$0.405

TP: N.A.; Analyst: Vivian Ye

– Steam sales volume was up 22.6% YoY to 2.16mn tons.

– Green investments (GI) recurring revenue of RMB648.7mn, up 53.1% YoY, while margins are recovering QoQ. GI recurring PATMI of RMB28.7mn was up 6.4% YoY.

Astrea 7 bonds – Additional Class B bonds available for retail investors.

Analyst: Shawn Sng

– Astrea 7 is the latest issuance under the Astrea bond series.

– The bonds are secured by cashflows from private-equity funds. Credit rating for the Class A-1, A-2 and B bonds are to be investment grade.

– 50% of the Class B bonds (USD) or US$100mn are made available to retail investors for subscription via ATM.

– Retail investors for Class B bonds should note the bonds are denominated in USD and it is expose to foreign currency risks.

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